Miserable October Retail Sales: Eye on Oil, Autos and Housing

The Commerce Department's release of October retail sales figures indicates a 2.8% drop in sales to $363.7 billion from September's $374 billion. October 2008, and its corresponding stock market crash, marked new lows for this latest economic debacle. The record plunge in retail sales tops the fallout from the September 11th attacks that effectively decimated November 2001 sales by 2.65%.

The report presents little information that any citizen of average intelligence should be unable to surmise. The raw data simply quantify the collapse of consumer confidence.

With the exception of food and beverage, health, and the odd 'miscellaneous store retailer' category, sales have declined in all of the thirteen groupings of these sales figures tabulated by the U.S. Census. Americans are shopping less, eating, and increasingly seeking medication to ease the pain.

Falling oil prices, and the weakening of petroleum demand, translated into a 12.7% reduction in gasoline station sales over the past month. The lessening burden of energy costs is the one saving grace of this report. Quietly, conspiracy theorists, agitated lawmakers, and misinformed economists have been dismissed by the march of time. The swift deterioration of oil prices from $150 to $60 per barrel, coupled with the world economy's inability to gain traction during this time frame shall serve as further proof that energy markets cannot be manipulated. High oil prices were never the sole factor in this global slowdown.

Energy policy will be put on the back burner by both parties. The G.O.P. calling card to 'drill, drill, drill,' will be challenged by environmentalists - lobbying against exposing the sensitive shores of Florida and permafrost terrain of Alaska to catastrophe with energy prices at these levels - and the left-wing theme of alternative energy will be dismissed as an impractical scheme of tree huggers. Solar energy, wind, and ethanol could not compete with oil prices at $150. Alternative energy investment is almost a pie-in-the sky non-issue with crude oil futures approaching $50.

Sorry, Mr. Pickens. Sorry, Mr. Gore.

Detroit is a wreck. Motor vehicle and parts dealer revenue fell by 5.5% in October, and automobile sales have been ravaged - to the tune of a 25% decrease in one year. General Motors stock is at $3 - levels not seen since 1946. GM shares held for sixty-two years have returned nothing. Ford stock has not fared much better - trading at an outrageous $1.80 per share, from 1999 levels at $35. Ford Motor Company, and GM are capitalized at $4.2 billion, and $1.8 billion, respectively. Private equity group, Cerberus Capital Management is allegedly looking to sell Chrysler to General Motors in some type of 'merger.'

Hence, let us value Chrysler at $1 billion. The market value of the Big Three automakers combined, is now a laughable $7 billion. For the purposes of comparison, ExxonMobil boasts a market capitalization of $375 billion. Also, Warren Buffet's net worth was calculated at $62 billion, as of March 2008. According to Forbes, 132 individuals on the planet Earth boast net worths equal to, or greater than $7 billion. They could all purchase the entire output of the U.S. auto industry at this very moment.

There are no takers.

With gargantuan unfunded, pension liabilities, lousy product lines, impaired access to credit, and a combative United Auto Worker's union, the intrinsic value of Detroit is actually - zero. Taxpayers will be responsible for this disaster. The solvency of The Big Three is a matter of national pride, and the ripple effect of Detroit's failure in the Upper Midwest would be apocalyptic to an already defeated Rust Belt.

Lastly, the furniture and home furnishings category details a 13.5% annual decrease in sales, proving that the housing industry remains in shambles. Although the National Association of Realtor's Housing Affordability Index numbers appear favorable - the housing bust is far from over. Credit has tightened, real property is plagued by oversupply, and job losses are mounting. These happenings will skew the algorithm which assumes a median income family may be able to purchase a median-priced home - with a 20% down payment.

Things could not get much worse.

Solution: Buy [almost] everything.

Disclosure: No positions in F or GM, Long XOM

Comments

[LikeSoup:]

It’s hard to know where the economy thing is headed but truly the best way to succeed in life as an individual is to identify work you enjoy which enables you to be happy while being with your family. LikeSoup.com

2008 Nov 16 07:49 AM

[msoori:]

Excellent article except for the little comment about the change from $150 to $60 per barrel as proof that energy markets cannot be manipulated. The fact that it went from $60 to $150 to begin with is proof that the energy market HAS BEEN manipulated. The victims of this will attest to it. What we can definitely see is that the sustainability of long term energy manipulation is not possible.

2008 Nov 16 11:46 AM

[Chris Lau:]

the longer home prices fail to stabilize, the longer it will take for market to stabilize. so far we have not had a single 2-month stabilization in homes.

2008 Nov 16 07:12 PM

[4HOFTA:]

Tiiimber!! Things couldn't get much worse? Oh, but it will. Darkly. Let's hope for a loctus invasion then at least we will have something to fry, bake, boil dip ect. But seriously, like that Humpty Dumpty & all of the Kings men ryme. It's like that with a twist. All of the kings men were eggs too....

2008 Nov 17 12:28 AM